Is Google Killing Cable?

New York city is the latest battleground for revenue between TV giants: While large broadcasters have recently been setback by their loss to Aereo, the company that provides legal stream of over the air broadcast signals on the internet, giants Time-Warner Cable and CBS have been fighting, leaving their customers without programming from CBS.

But as cable companies and TV broadcasters are battling to increase the amount of dollars each gets from anyone who purchases a cable service subscription, companies like Apple and Google are quietly moving to replace the old system, allowing for TV streaming to become a reality.

Apple took the first tentative steps with the AppleTV, a small device that allow users to stream content from certain apps on iOS-enabled phones and tablets directly to their TV screens. Priced at $99, the device essentially turns your TV screen into a second screen for the content you consume on mobile devices.

Google has decided to enter the space with Chromecast, a device priced at $35 that allows anyone to stream content from Chrome web browsers (available on PC and mac), Netflix, and YouTube. For less than going out to movies, a couple can essentially internet-enable their TV screen and use any mobile device (iOS, Android) or computer running Google Chrome (Windows or OSX) to stream internet content.

Both AppleTV and Chromecast are relatively simple to set up for anyone and the controls are simple enough that anyone who understand the basics of using a web browser, tablet, or smartphone can easily send video to the screen. Because of how easy and cheap they are to setup, the two devices point to a world where cable TV subscription will no longer be as relevant as it is today, with internet connectivity becoming the dominant data stream into the house.

If you look at the recent effort on programming from Netflix, it is clear that today’s successful TV channels do not need to have a physical programming grid that ties them to a rigid schedule, nor do they need to be distributed as part of a cable TV package. Netflix today, from a product offering, is getting increasingly hard to distinguish from HBO, except for the fact that its subscribers get to choose what they watch and when they watch it.

As has long been my contention, there are very few types of programming that justify real-time broadcasting: news, sports, and award events represent the exception and here, companies like Al-Jazeera have proven that you can build a following by doing live streaming over the internet (unfortunately, upon its purchase of the Current.TV cable channel, Al-Jazeera has decided to abandon its pioneering ways, attaching itself to the dying traditional model instead).

With some of the most expensive cable TV channel representing almost $5 in a consumer’s bill (whether they watch it or not), there is room for a very different model, one where individual channels could offer their content online (many already do) for a fee within subscription apps that could be send to the TV with AppleTV or Chromecast.

Aereo, for example, already offers the over-the-air broadcasts (about 20-30 channels) as an app that runs on iPhone and iPads and can beam to AppleTV and it is safe to assume that they will be offering something similar on Android and Chromecast in the not too distant future.

If individual TV channels were to charge a membership fee similar to that offered by Netflix ($8), they could increase their overall revenue while leaving cable TV providers behind. Infrastructure costs have been rapidly dropping and companies can now purchase such turnkey infrastructures from third party companies like Brightcove or MLBAM, the digital arm of the MLB, for relatively small per-user prices. Channels aggregating streams over the internet would then have substantially more information about what their viewers are watching and when, giving them the ability to decide what to fund and what to kill, and whether to charge higher advertising rates for one show versus another.

Such a breakdown will happen and one can assume that it will happen relatively soon if incumbents do not want to be defeated by newcomers. In the 1980s and 1990s, large companies like Turner Broadcasting, Hearst TV, HBO, Starz, and Cinemax were built on the new technology of cable TV, displacing traditional broadcasters as the leaders in the TV space. It is only a question of time before such thing happen again but with the Internet as the distribution network instead of the regular cable aggregators consumers have gotten used to.

And when that happens, the incumbents may find themselves with little choice than to join the newcomers.

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2 Comments. Leave new

Netflix only gets the dregs. It has very little money to pay for content. So it gets only old or worthless moves and television series – and only for limited amounts of time.

Cable TV on the other hand is willing to pay billions for content up front. This allows it to subsidize channels we would otherwise not receive.

Ala carte TV content is a dream. But it is expensive if each individual channel has to pay for itself without the subsidy of Cable TV providers. NBA TV for example costs $150 a season. Add a few more of such channels, and soon your bill will be much higher than for Cable TV. Realize that TV content is EXPENSIVE to produce. Someone has to pay the bills for it. If done ala carte, then the cost will be much higher per customer.

People like Cable TV as it is. You don’t have to think so hard. You just have to flip the channels on your remote.

Ala carte TV forces you to think too hard. And it will cost a lot in the long run compared to the flat fee of Cable TV.

    Have you been on Netflix lately?

    Shows like “House of Cards”, “Arrested Development” and “Orange is the New Black” are original content you can’t get anywhere else.

    NBA TV at $150 a year means that it’s $12.50 a month (for ALL the games). If done a la carte, you will see some channels go up in price (eg. sports) and some go down (eg. no sports). You might even see some innovative models where channels are offering promo-weeks to give people a taste or day-passes…

    True that your cost, in the end won’t be that different from what you get today on a basic package but that package will be tailored to you with exactly the channels you want to watch.